the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … the international data on large consumption declines. We allow the risk of this rare disaster to be stochastic, which … turns out to be crucial to the model's ability to explain both equity volatility and option prices. We explore different …

demanding a premium for hedging risk. This paper examines the consistency of those explanations with returns on dynamically … on synthetic options -- with the variance risk premium shrinking towards zero -- while various drivers of the cost and … risk of hedging options exposures have declined, consistent with a model in which intermediaries drive option prices …

higher than justified by investors' own subsequent short-term return expectations. This excess volatility in forward … expectations helps account for excess volatility in prices, inelastic demand for equities, and stylized facts about the equity term …

of stochastic volatility and jumps for option valuation. This example highlights the impact on option 'smirks' of the … joint distribution of jumps in volatility and jumps in the underlying asset price, through both amplitude as well as jump …

facilitate empirical analysis of both volatility forecasting and volatility risk pricing across distinct future states of the …The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility … more compatible with the related concept of corridor implied volatility (CIV). We provide a comprehensive derivation of the …

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude …-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in … stochastic volatility. The model features correlations between innovations to futures prices and volatility, quasi …

We use a novel pricing model to filter times series of diffusive volatility and jump intensity from S&P 500 index … options. These two measures capture the ex-ante risk assessed by investors. We find that both components of risk vary … equilibrium model with a representative investor, we translate the filtered measures of ex-ante risk into an ex-ante risk premium …

-dependent options and options on assets with stochastic volatility and jumps. " …

competing explanations: stochastic volatility models with negative correlations between market levels and volatilities, and … squares/Kalman filtration methodology. While volatility and level shocks are substantially negatively correlated, the … stochastic volatility model can explain the implicit negative skewness only under extreme parameters (e.g., high volatility of …

Black-Scholes constant volatility assumption is violated in practice. These authors hypothesize that the volatility of the … underlying asset's return is a deterministic function of the asset price and time and develop the deterministic volatility … significance of the implied deterministic volatility function by examining the predictive and hedging performance of the DV option …